On Tuesday, Seaport Global Securities raised its rating on Berkshire Hills Bancorp (NYSE:BHLB) from Neutral to Buy, setting a price target of $39.00. The upgrade follows Berkshire Hills Bancorp's announcement on Monday that it will acquire Brookline Bancorp (NASDAQ:BRKL) in an all-stock merger of equals. The deal is valued at approximately $1.14 billion, or $12.68 per Brookline Bancorp share.
Currently trading at $29.87, BHLB has shown strong momentum with a 43.76% price return over the past six months. InvestingPro analysis indicates the stock is currently fairly valued, with additional insights available in the comprehensive Pro Research Report.
Berkshire Hills Bancorp recently increased its capital by $100 million at a price of $29.00 per share, which will result in a post-merger ownership structure of 51% for BHLB shareholders, 45% for BRKL shareholders, and 4% for new investors. The combined entity's leadership will consist of David Brunelle as Chairman from BHLB, with Paul Perrault serving as President & CEO and Carl Carlson as CFO & CSO, both from BRKL.
The closing of the transaction is anticipated to take place in the second half of 2025, with a target date of September 30, 2025. Post-closing, Berkshire Hills Bancorp expects to increase its dividend to $1.29 per share from the current $0.72, which currently yields 2.41%. The company has maintained dividend payments for 25 consecutive years, according to InvestingPro data.
The merged bank will boast $24 billion in assets and $18 billion in deposits, featuring a cost of deposits (COD) of 2.57%. Subscribers to InvestingPro gain access to detailed dividend analysis and 6 additional ProTips that provide crucial insights into BHLB's financial health.
The integration of the two banks is expected to result in a pro forma bank with significant market presence, including a top 10 deposit market share in 14 of 19 pro forma Metropolitan Statistical Areas (MSAs). The analyst highlighted the strong positioning of the combined franchise in the New England market, particularly within the Boston MSA where it ranks #8 overall and as the #3 largest Massachusetts-based bank serving the area.
Financial projections for the merged entity include a 40% earnings per share accretion for fiscal year 2026 and a tangible book value dilution earnback period of 2.9 years. The merger is also expected to enhance return on assets (ROA) and return on average tangible common equity (ROATCE), with forecasts of 1.28% and 16.5%, respectively, for fiscal year 2026. With a current market capitalization of $1.26 billion and a P/E ratio of 31.71, BHLB shows strong potential for growth following this strategic merger.
In other recent news, Berkshire Hills Bancorp and Brookline Bancorp announced a definitive agreement for a merger valued at approximately $1.1 billion. This development will result in a financial institution with $24 billion in assets and 148 branch offices.
The agreement stipulates that Brookline shareholders will receive 0.42 shares of Berkshire stock for each share of Brookline stock they own. Berkshire has also secured agreements with investors to raise $100 million by issuing common stock at $29.00 per share, which will reinforce the merged bank's balance sheet and regulatory capital ratios.
The combined entity, which will reveal a new name and ticker symbol before the merger's completion, is expected to become a significant player in the Northeast market. Both banks' management teams will collaborate to mitigate integration risks and enhance operational performance. The merger is anticipated to close by the end of the second half of 2025, pending necessary regulatory approvals and approvals from Berkshire and Brookline shareholders.
In more recent developments, Berkshire Hills Bancorp reported strong financial results in its third quarter of 2024, with operating earnings of $24.8 million. The bank also disclosed improved capital ratios, with CET1 at 11.9% and TCE at 9.1%. The bank's management projects the net interest margin (NIM) to be between 3.10% and 3.20% in Q4 2024. The bank's recent strategic initiatives and expectations for the upcoming quarter underscore its focus on organic growth, with a 20% year-over-year increase in the loan pipeline.
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